Leveraging Cash Management Innovation to Enhance the Customer Experience

by Firas Wanli, Chief Financial Officer and Enamuddin Khan, Treasury Manager, Khidmah LLC

The diverse nature of Khidmah’s property-related services, and the growth in our business over recent years, created a variety of cash and treasury related challenges, not least difficulties in controlling, managing and reconciling incoming and outgoing cash flows in line with industry best practices. As an organisation, Khidmah seeks to demonstrate best-in-class efficiency, control and quality of service across all of its activities, resulting in an ambitious project involving Khidmah’s treasury team and partner bank Abu Dhabi Commercial Bank (ADCB).
 

Business challenges

The growth of Khidmah had resulted in a substantial increase in the volume and nature of our incoming and outgoing flows. Reconciliation of incoming flows posed particular challenges, which are the result of a variety of payment methods (e.g., bank transfers, cash, cheques and card payments) and are managed within Khidmah and Aldar in SAP and Oracle platform. With the added complication that customers opting for Khidmati services are able to pay annually or when they request maintenance services, owners’ association payments also need to be reconciled, which are managed through SAP and STRATA ERPs.

We recognised that by overcoming these challenges and associated issues, we would optimise financial and operational efficiency, and position the organisation for future growth. Consequently, we were seeking a banking partner that would enable us to streamline our receivables through different methods, and facilitate automated reconciliation through better quality, more standardised information. This would include card collections that could be provided at Khidmah service centres together with an integrated online portal, mobile and physical points of sale (MPOS and POS) and cash deposit machines (CDM).

In addition to incoming payments, we also wanted to use the opportunity to optimise outgoing payments. We process around 2,000 vendor payments and refunds each month using bank transfer letters and cheques. We were keen to automate the payment initiation and approach process as far as possible through a state-of-the-art cash management system, Pro-cash, integrated with the bank through a robust host-to-host connection between our ERP and our bank. We also decided to put in place a corporate card programme for better travel and expenses management.

We already had a long-standing, trusted relationship with ADCB, and following a detailed investigation of our business challenges and potential solutions, we were very satisfied that the bank was able to offer the scalability and security of cash management solution that we required, as well as providing the technical support and solution innovation that would enable us to develop a high quality offering to improve the experience of both our customers and vendors in working with Khidmah.

Solution in practice

Outgoing payments. By working with our bank, ADCB, IT teams and technology partners, we have now been able to streamline the approval and transmission of all outgoing flows in line with industry best practices and the highest levels of corporate governance. Payments, including vendor payments, refunds and payroll, are initiated in one of Khidmah’s ERPs, with automatic processing, including both domestic and international transfers, and cheque printing on our premises. Similarly, we have achieved automatic reconciliation of these flows by enriching and standardising the data format between ADCB and our three ERPs.

Incoming payments (collections). We have worked with ADCB to streamline the collection process through a variety of different collection methods. For example, ADCB has provided us with remote cheque scanning (for both current and post-dated cheques), CDMs, POS, MPOS and an e-Commerce based online payment gateway for card payments. These collection solutions are supported by comprehensive, automated reconciliation capabilities, with seamless integration of MT940 messages into our ERPs (SAP, Oracle & Strata) and customised reporting from Network International for POS and MPOS transactions.

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Benefits and outcomes

We have experienced significant benefits in our operational efficiency since implementing these solutions, with a reduction in collection expenses, more rapid, automated reconciliation and ultimately, the ability to offer a better service to our customers and work with suppliers more effectively.

Outgoing payments. Looking first at outgoing payments, senior management are now able to review and approve payments through Pro-cash rather than manually, which also permits remote approval. We have been able to refine security levels for payment approvals, including nominating different individuals and teams for payment initiation, validation, dual-level approval and payment transmission, which makes our workflow more robust and auditable. Vendors and customers receive notification of payment via SMS or email, and we are able to provide a better service to customers by reducing the time taken to process refunds from seven to two working days. Utility payments, which are a key payment type for Khidmah, are paid promptly, avoiding the risk of delay and disconnection of services, and enabling automated allocation of utility payments to the relevant account.

Our new processes allow us to conduct bulk payments, enhancing the productivity of our accounts payable department, while we have also reduced the number of manual cheques and transfers. This saves time and cost, and improves control and auditability.

Incoming payments (collections). We have seen substantial benefits in the way that we process collections across every collection type that we support. For example, we now collect cash and cheques through Khidmah collection centres, ensuring that credits reach our account more quickly, reducing transport costs and resource requirements, and improving security and fraud prevention. With customised cash deposit machines in place, our ability to manage cash securely and promptly is greatly reduced. These are connected to the bank, and amounts credited to our account every two hours. End-of-day cash reports for each CDM assist with automatic reconciliation, and reduce the risk of unidentified direct cash deposits associated with normal bank CDMs. We support both current-dated and post-dated cheques using a remote cheque scanning system which enables us to credit the value of cheques on the cheque date, and capture payment details for reconciliation. Post-dated cheque archiving helped to manage these cheques efficiently, and eliminates the risk of misplacing and delay in deposit. We receive a bounced cheque report promptly, so we can follow up to collect the cheque amount and fees quickly, minimising overdue payments and supporting working capital, help in follow-up and subsequent collection of the bounced cheque fees and amount. The time spent filling out deposit slip and deposit cheques at the bank counter has been eliminated, which also improves operational efficiency.

The introduction of our online payment portal and POS has also increased choice and flexibility amongst our customers, improving customer satisfaction and retention. MPOS has reduced the amount of cash we receive, particularly for Khadmati services from retail customers. Increasing the proportion of electronic payments we receive is far better in terms of achieving rapid credit to our account, integrating data into our ERP, automating reconciliation and reducing manual processing.

Bank account reporting. By integrating MT940 information into our ERPs, we have full access to information on balances and incoming/ outgoing transactions across all 95 bank accounts that we hold with ADCB, with the ability to identify and reconcile flows automatically in the relevant ERP. This is important in delivering a high quality service to our customers, but also identifying follow-up actions on amounts not received quickly, therefore reducing overdues. In addition to improving reconciliation of transactions with external counterparties, we have also been able to enhance intercompany reconciliation between our seven business units which further saves time and costs.

We also have better visibility and control over cash, allowing us to analyse and forecast cash and liquidity more effectively, while treasury is able to optimise its resources, improve accuracy and efficiency and automate the production of key reporting, allowing us to direct the team towards more value added activities.

Sharing success

We have received excellent feedback from vendors as well as customers. Between 70-80% of suppliers can now be paid electronically, while smaller suppliers that are not yet comfortable with receiving electronic payments still receive a high quality experience when working with Khidmah.

There are a variety of reasons why this project has been such a success, not least the dedication and expertise from ADCB, Khidmah and our technology partners. We have adopted a close partnership approach from the beginning, which has been instrumental in establishing a common understanding and priorities. All parties have been generous and transparent in sharing expertise, which is essential during a complex project with multiple stakeholders. In particular, there was a clear ‘win win’ both for Khidmah and ADCB by expanding and deepening our relationship and investing in mutually beneficial innovation.

Looking ahead, although we have already achieved a great deal, there are still areas that we want to improve. For example, we are working with ADCB to develop and integrate a mobile app-based payment solution which will make it even easier for our customers to pay us, which we anticipate will further reduce the use of cash and cheques, improve collection timeliness and reconciliation capability, and enhance the customer experience.